Developing Your Rate Sheet
How can you develop a price list that is both profitable and competitive? By knowing what it costs to develop your service as well as how much your competitors charge for a similar service.
First, you must establish standard rates for your primary services. For example, you may determine that your primary service, time management consulting, requires that you charge $82 an hour for your services. You find that your competitors are charging $70 an hour for the same service. What should you do?
If you want to undercut your competitor (and maybe start a price war), you can price the service at $65 and make a smaller profit. Or you can offer it at the same price as your competitor and offer something your competition doesn't offer, such as free access to some of your resources.
Or you can compete by offering more individualized service, giving the perception of greater value. Clients want value.
A retainer is a contract that says you will be available to a client for a specific number of consulting hours (or services) for a set fee, and will not consult for the client's competitor.
Retainers are popular with business and professional services and are catching on with consumer consultants as well. Retainers offer security to both the client and the consultant.
Establishing a standard rate sheet, offering various levels of service, offering specific discounts, and accepting retainers can help you make your consulting service profitable.
Many consulting trade associations offer suggested proposals that you can modify to your own needs. It's one of the many benefits of association membership. Most consultants have a few boilerplate or standardized proposals that they modify for specific client needs. They can make the proposal process much easier.
A proposal is an offer to work with a client under specific terms and conditions. A proposal does not become a contract until both parties agree and either sign the proposal or sign a full contract written to expand on the proposal's terms.
The following is a typical proposal for a business consultant.
A contract must identify the parties involved, define the agreement of what is to be done, explain the details of payment, and be signed by all parties. You don't have to be an attorney to write a binding contract.
AAA Management Services
Building Business for Success
935 View Street
Yourtown, CA 98765
Proposal for Consulting Services
On February 15, 2009, discussions were held between John Smith, owner of AAA Management Services, and Mary Johnson, owner of Johnson Studios, for the purpose of enhancing Johnson Studios' profitability in the coming year.
In response to these discussions, AAA Management Services proposes to assist Mary Johnson and other owners and employees of Johnson Studios in producing and analyzing accounting records, and making recommendations on increasing business profitability.
AAA Management Services' fee will be based on the number of actual hours incurred on Johnson Studios' behalf at a rate of $160 per hour. AAA Management Service agrees to submit weekly time reports every Monday for actual hours incurred during the previous week. Johnson Studios agrees to pay the invoices on presentation. Either party may cancel this agreement within seven (7) days written notice to the other party.
Johnson Studios further agrees to pay all authorized expenses when due.